Virgin Aus Fpo (ASX:VAH)
Historical Stock Chart
1 Year : From May 2012 to May 2013
--Etihad stake in Virgin Australia worth around A$35.9M
--Says interest strengthens alliance
--Joins Richard Branson's Virgin Group, Air New Zealand as shareholders
(Recasts first paragraph; adds implied value of stake purchase in second paragraph; details throughout.)
By Ross Kelly
SYDNEY--Abu Dhabi-owned Etihad Airways has bought a near 4% stake in Virgin Australia Ltd. (VAH.AU), amid growing signs that the Persian Gulf's fast growing carriers are looking to expand their presence Down Under.
The stake in Australia's second-biggest carrier has been built over recent weeks, through purchases of shares on the open market, and strengthens a recent alliance deal signed between the two companies, Etihad said in a statement. Virgin Australia shares closed trading Monday at 41 cents each, giving the company a market capitalization of 906.2 million Australian dollars (US$883.7 million), that gives an implied valuation on Etihad's 3.96% stake of A$35.9 million.
Etihad's investment follows denials by Virgin's Australian rival Qantas Airways Ltd. (QAN.AU) that it would consider a formal tie up with Dubai-based Emirates Airline. Analysts see some merits in a deal, especially given that Qantas last month decided to split its domestic and international flight operations into separately managed business units.
For Etihad, which is backed by the oil-wealth of Abu Dhabi's ruling family, the Virgin Australia deal follows its acquisition of a 3% stake in Irish budget airline Aer Lingus Group PLC (EIL1.DB) in early May and last year a 29% share in Air Berlin.
The airline operates 24 flights a week between Abu Dhabi in the Persian Gulf and Australia and last month said it leased a Virgin Australia Boeing 777-300 ER plane for use between the sheikdom and Kuala Lumpur.
Virgin Australia has also signed alliances with Singapore Airlines, Air New Zealand and Delta Air Lines Inc. Etihad didn't say whether it intends to increase its stake further. Virgin Australia recently completed a restructure that helped it get around Australian foreign ownership laws that limited offshore investment in the company to 49%. Richard Branson's Virgin Group owns 26% of Virgin Australia and Air New Zealand has an option for an up to 20% stake.
Etihad, Emirates Airline and Qatar Airways are among the three fastest growing airlines in the world, each with ambitions to create global aviation hubs in the Middle East. More established carries in the U.S. and Europe have complained of unfair competition. They allege the airlines receive state subsidies and tax-breaks, something that Middle East companies deny.
Etihad's first-quarter revenue rose to US$989 million from US$770 million, while the airline flew 2.36 million passengers, up 27% on year, with 67 aircraft in service compared with 57 a year earlier, the nine-year old carrier said in April.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; Ross.Kelly@dowjones.com